Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia

Beriso Bati

doi:doi:10.11648/j.ijebo.20241204.14

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Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia

Beriso Bati^*

Published in International Journal of Economic Behavior and Organization (Volume 12, Issue 4)

Received: 26 September 2024 Accepted: 21 October 2024 Published: 30 December 2024

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Abstract

The present study was carried out with the objectives of understanding the existing resource allocation practice, the possibility of increasing farm income through optimal allocation of resources under risk situation, and to develop risk efficient sets of farm plans for representative households based on cross-sectional data drawn from 240 households who were selected using stratified multi-stage random sampling technique during the 2022/23 production year. Linear programming and MOTAD model were used to analyse the data. The results of descriptive analysis show that most of the socioeconomic variables were found to be significantly different among the three agro-ecologies. Based on the existing farm situation and prevailing price levels, households in highland, midland, and lowland areas were obtaining the total annual income of Birr 19,480.00, 22,356.00, and 14,717.00, respectively. From the results of the MOTAD risk programming model, Sustainable plans within which households can minimize risks and remain efficient are suggested for the three identified agro-ecologies. The model results also show that, in all agro-ecologies under risk neutral plan, there is substantial difference between households’ existing plan and gross income maximization plan implying that if farm households reallocate their resources among different activities, there is a much room to increase their income under risk neutral plan. Overall, from general discussion there is need for policies that spur investment in public infrastructure, rural financial markets, private investment, and support institutions to address the problems of high transaction costs to investors, and reduce risks faced by farmers.

Published in	International Journal of Economic Behavior and Organization (Volume 12, Issue 4)
DOI	10.11648/j.ijebo.20241204.14
Page(s)	223-238
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Cropping pattern, Optimization, MOTAD Model, Resource Allocation, Linear Programming Analysis

References

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[2]	Berhanu, K., 2012. The political economy of agricultural extension in Ethiopia: economic growth and political control.
[3]	Mussaa, E. C., Obare, G. A., Bogale, A., Simtowe, F., 2011. Resource use efficiency of smallholder crop production in the central highlands of Ethiopia.
[4]	Berhanu, A., 2009. The Ethiopian Extension and the Farmer: A View from the Farm, in: The Ethiopian Extension and the Farmer: A View from the Farm. Presented at the 16th International Conference of Ethiopian Studies, Trondheim.
[5]	FDRE, 2012. Ethiopian Climate Resiliant Green Economy (CRGE) strategy.
[6]	Sulewski P, Kłoczko-Gajewska A (2014) Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland. Stud Agric Econ 116(3): 140–147.
[7]	ZoARD. 2022. Report on major agricultural activities. East Shewa Zone, Zonal Office of Agriculture and Rural Development (ZoARD), un published report.
[8]	Rosa F, Vasciaveo M (2014) “Volatility in US and Italian agricultural markets, interactions and policy evaluation”, in PRICE VOLATILITY AND FARM INCOME STABILISATION Modelling Outcomes and Assessing Market and Policy Based Responses, 123th EAAE Seminar, Dublin.
[9]	Walangitan, H. D., Setiawan, B., Tri Raharjo, B., Polii, B., 2012a. Optimization of land use and allocation to ensure sustainable agriculture in the catchment area of Lake Tondano, Minahasa, North Sulawesi, Indonesia. Int J Civ Env. Eng IJCEE-IJENS 12, 68–75.
[10]	Chetty S and Adewumi A O. 2013. Three new stochastic local search metaheuristics for the annual crop-planning problem based on a new irrigation scheme. Journal of Applied Mathematics 2013: 1–14.
[11]	NPC (National Plan Commission). 2016. Growth and Transformation Plan II (GTP II), National Plan Commission Volume I: Main text Addis Ababa.
[12]	Rehima, M., Belay Kassa, Dawit Alemu, and Rashid S. 2013. Factors affecting farmers‟ crops diversification: evidence from SNNPR, Ethiopia. International Journal of Agricultural Sciences, 3(6): 558-565.
[13]	Saltelli A. 2002. Sensitivity analysis for important assessment. Risk Analysis 22(3): 579–90.
[14]	Shrivastava S K, Verma M K and Devatha C P. 2012. Optimization modelling for crop planning of hasdeo bango command. International Journal of Engineering Research and Technology 1(9): 1–5.
[15]	Pokhriyal, H. C. and Bist, N. S. (1998) Planning for agricultural development in the Himalayan region: An environmental approach. The Environmentalist 8, 47-55.
[16]	Powell, J. M., Pearson, R. A. and Hiernaux, P. H. (2004) Crop-livestock interactions in the west African drylands. Agronomy Journal 96, 469-483.

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APA Style

Bati, B. (2024). Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. International Journal of Economic Behavior and Organization, 12(4), 223-238. https://doi.org/10.11648/j.ijebo.20241204.14

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ACS Style

Bati, B. Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. Int. J. Econ. Behav. Organ. 2024, 12(4), 223-238. doi: 10.11648/j.ijebo.20241204.14

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AMA Style

Bati B. Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. Int J Econ Behav Organ. 2024;12(4):223-238. doi: 10.11648/j.ijebo.20241204.14

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@article{10.11648/j.ijebo.20241204.14,
  author = {Beriso Bati},
  title = {Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia
},
  journal = {International Journal of Economic Behavior and Organization},
  volume = {12},
  number = {4},
  pages = {223-238},
  doi = {10.11648/j.ijebo.20241204.14},
  url = {https://doi.org/10.11648/j.ijebo.20241204.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20241204.14},
  abstract = {The present study was carried out with the objectives of understanding the existing resource allocation practice, the possibility of increasing farm income through optimal allocation of resources under risk situation, and to develop risk efficient sets of farm plans for representative households based on cross-sectional data drawn from 240 households who were selected using stratified multi-stage random sampling technique during the 2022/23 production year. Linear programming and MOTAD model were used to analyse the data. The results of descriptive analysis show that most of the socioeconomic variables were found to be significantly different among the three agro-ecologies. Based on the existing farm situation and prevailing price levels, households in highland, midland, and lowland areas were obtaining the total annual income of Birr 19,480.00, 22,356.00, and 14,717.00, respectively. From the results of the MOTAD risk programming model, Sustainable plans within which households can minimize risks and remain efficient are suggested for the three identified agro-ecologies. The model results also show that, in all agro-ecologies under risk neutral plan, there is substantial difference between households’ existing plan and gross income maximization plan implying that if farm households reallocate their resources among different activities, there is a much room to increase their income under risk neutral plan. Overall, from general discussion there is need for policies that spur investment in public infrastructure, rural financial markets, private investment, and support institutions to address the problems of high transaction costs to investors, and reduce risks faced by farmers.
},
 year = {2024}
}

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TY  - JOUR
T1  - Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia

AU  - Beriso Bati
Y1  - 2024/12/30
PY  - 2024
N1  - https://doi.org/10.11648/j.ijebo.20241204.14
DO  - 10.11648/j.ijebo.20241204.14
T2  - International Journal of Economic Behavior and Organization
JF  - International Journal of Economic Behavior and Organization
JO  - International Journal of Economic Behavior and Organization
SP  - 223
EP  - 238
PB  - Science Publishing Group
SN  - 2328-7616
UR  - https://doi.org/10.11648/j.ijebo.20241204.14
AB  - The present study was carried out with the objectives of understanding the existing resource allocation practice, the possibility of increasing farm income through optimal allocation of resources under risk situation, and to develop risk efficient sets of farm plans for representative households based on cross-sectional data drawn from 240 households who were selected using stratified multi-stage random sampling technique during the 2022/23 production year. Linear programming and MOTAD model were used to analyse the data. The results of descriptive analysis show that most of the socioeconomic variables were found to be significantly different among the three agro-ecologies. Based on the existing farm situation and prevailing price levels, households in highland, midland, and lowland areas were obtaining the total annual income of Birr 19,480.00, 22,356.00, and 14,717.00, respectively. From the results of the MOTAD risk programming model, Sustainable plans within which households can minimize risks and remain efficient are suggested for the three identified agro-ecologies. The model results also show that, in all agro-ecologies under risk neutral plan, there is substantial difference between households’ existing plan and gross income maximization plan implying that if farm households reallocate their resources among different activities, there is a much room to increase their income under risk neutral plan. Overall, from general discussion there is need for policies that spur investment in public infrastructure, rural financial markets, private investment, and support institutions to address the problems of high transaction costs to investors, and reduce risks faced by farmers.

VL  - 12
IS  - 4
ER  -

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Author Information

Beriso Bati

Socio-Economics Research Team, Adami Tulu Agricultural Research Center, Batu, Ethiopia

Contact Email

http://orcid.org/0009-0001-1320-5553

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APA Style

Bati, B. (2024). Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. International Journal of Economic Behavior and Organization, 12(4), 223-238. https://doi.org/10.11648/j.ijebo.20241204.14

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ACS Style

Bati, B. Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. Int. J. Econ. Behav. Organ. 2024, 12(4), 223-238. doi: 10.11648/j.ijebo.20241204.14

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AMA Style

Bati B. Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia. Int J Econ Behav Organ. 2024;12(4):223-238. doi: 10.11648/j.ijebo.20241204.14

Copy | Download

@article{10.11648/j.ijebo.20241204.14,
  author = {Beriso Bati},
  title = {Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia
},
  journal = {International Journal of Economic Behavior and Organization},
  volume = {12},
  number = {4},
  pages = {223-238},
  doi = {10.11648/j.ijebo.20241204.14},
  url = {https://doi.org/10.11648/j.ijebo.20241204.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20241204.14},
  abstract = {The present study was carried out with the objectives of understanding the existing resource allocation practice, the possibility of increasing farm income through optimal allocation of resources under risk situation, and to develop risk efficient sets of farm plans for representative households based on cross-sectional data drawn from 240 households who were selected using stratified multi-stage random sampling technique during the 2022/23 production year. Linear programming and MOTAD model were used to analyse the data. The results of descriptive analysis show that most of the socioeconomic variables were found to be significantly different among the three agro-ecologies. Based on the existing farm situation and prevailing price levels, households in highland, midland, and lowland areas were obtaining the total annual income of Birr 19,480.00, 22,356.00, and 14,717.00, respectively. From the results of the MOTAD risk programming model, Sustainable plans within which households can minimize risks and remain efficient are suggested for the three identified agro-ecologies. The model results also show that, in all agro-ecologies under risk neutral plan, there is substantial difference between households’ existing plan and gross income maximization plan implying that if farm households reallocate their resources among different activities, there is a much room to increase their income under risk neutral plan. Overall, from general discussion there is need for policies that spur investment in public infrastructure, rural financial markets, private investment, and support institutions to address the problems of high transaction costs to investors, and reduce risks faced by farmers.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Economic Analysis of Smallholder Major Crop Production Under Condition of Risk: The Case of West Arsi and East Shewa Zones of Oromia

AU  - Beriso Bati
Y1  - 2024/12/30
PY  - 2024
N1  - https://doi.org/10.11648/j.ijebo.20241204.14
DO  - 10.11648/j.ijebo.20241204.14
T2  - International Journal of Economic Behavior and Organization
JF  - International Journal of Economic Behavior and Organization
JO  - International Journal of Economic Behavior and Organization
SP  - 223
EP  - 238
PB  - Science Publishing Group
SN  - 2328-7616
UR  - https://doi.org/10.11648/j.ijebo.20241204.14
AB  - The present study was carried out with the objectives of understanding the existing resource allocation practice, the possibility of increasing farm income through optimal allocation of resources under risk situation, and to develop risk efficient sets of farm plans for representative households based on cross-sectional data drawn from 240 households who were selected using stratified multi-stage random sampling technique during the 2022/23 production year. Linear programming and MOTAD model were used to analyse the data. The results of descriptive analysis show that most of the socioeconomic variables were found to be significantly different among the three agro-ecologies. Based on the existing farm situation and prevailing price levels, households in highland, midland, and lowland areas were obtaining the total annual income of Birr 19,480.00, 22,356.00, and 14,717.00, respectively. From the results of the MOTAD risk programming model, Sustainable plans within which households can minimize risks and remain efficient are suggested for the three identified agro-ecologies. The model results also show that, in all agro-ecologies under risk neutral plan, there is substantial difference between households’ existing plan and gross income maximization plan implying that if farm households reallocate their resources among different activities, there is a much room to increase their income under risk neutral plan. Overall, from general discussion there is need for policies that spur investment in public infrastructure, rural financial markets, private investment, and support institutions to address the problems of high transaction costs to investors, and reduce risks faced by farmers.

VL  - 12
IS  - 4
ER  -

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